by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Two hundred billion dollars in federal funding is especially inadequate when one considers these numbers against the state and local crisis that could define the next generation: pension and health-care costs. As of 2015, the last full year for which complete data are available, states had funded only 72 percent of their future obligations to government workers, according to the Pew Charitable Trusts. That leaves a $1.1 trillion deficit. On health care for public-sector retirees, states owe $646 billion.
In states from New Jersey to Kentucky, these numbers mean real, looming cash calls of billions of dollars a year. New Jersey, for example, has set aside just 30 percent of the money it needs to fund pension payments, according to a new Manhattan Institute study. New Jersey taxpayers face a grave risk. A mild recession could mean that in a few years it would have to triple, or more, its current $2 billion annual pension contribution just to pay current retirees, let alone set aside money to grow for the future tab. This is a state that, along with New York, is supposed to come up with new revenues, under Trump’s proposal, to fund the Hudson Tunnel. And it’s not just blue states that are distressed by retirement liabilities: Kentucky, for example, has funded just 38 percent of its pension obligations, and South Carolina, 58 percent. States that have funded their pensions in the range of two-thirds or so — Alabama, Alaska, Indiana, Louisiana, and New Hampshire among them — could benefit from some modest shoring up.
There is a way, though, for the White House and Congress to ease, if not solve, this crunch: Offer states credit, in the form of more federal infrastructure money, if they pare back their pension and health-care obligations to future retirees.